Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges and (EEM) short

Market Exposure: Moved to 75% Net Long

BOTTOM LINE: Today's overall market action is very bullish as the S&P 500 trades back above its 50-day moving average despite Eurozone debt angst, rising energy prices, Obamacare/US fiscal cliff worries, earnings concerns and rising global growth fears. On the positive side, Oil Tanker, Oil Service, Steel, Paper, Software, Computer, Semi, Disk Drive, Networking and Homebuilding shares are especially strong, rising more than +3.0%. Small-cap stocks are outperforming. Tech/Homebuilding shares have traded very well throughout the day. Copper is surging +5.1%. Major Asian indices rose around +1.5% overnight, led by a 2.6% gain in India. Shanghai rose +1.35%, but is still down -1.6% for the week. Major European indices are soaring around +4.5%, led by a +6.6% gain in Italy. The Bloomberg European Bank/Financial Services Index is jumping +4.4%(still down -.2% this week). Brazilian equities are rising +2.9% today, but are down -2.2% for the week and down -4.5% ytd. The France sovereign cds is down -4.7% to 188.83 bps, the Spain sovereign cds is down -9.91% to 531.29 bps, the Italy sovereign cds is falling -9.5% to 487.89 bps, the Ireland sovereign cds is down -9.6% to 553.31 bps, the Brazil sovereign cds is down -4.0% to 155.78 bps(still up +3.4% in 5 days) and the Russia sovereign cds is down -7.4% to 230.56 bps. Moreover, the European Investment Grade CDS Index is down -6.7% to 165.90 bps, the Spain 10Y Yld is down -8.8% to 6.33%(still up +1.25% in 5 days) and the Italian/German 10Y Yld Spread is down -9.9% to 421.57 bps(still up +1.2% in 5 days). On the negative side, HMO, Utility, Restaurant and Airline shares are lower-to-flat on the day. The UBS-Bloomberg Ag Spot Index is rising another +2.0%, Lumber is flat, Oil is soaring +9.0% and Gold is up +2.8%. The Citi Latin America Economic Surprise Index is falling to -14.2 today, which is the lowest since mid-Oct. of last year. The Germany sovereign cds is underperforming, falling just -.9% to 103.0 bps(up +2.8% in 5 days) and the China Development Bank Corp CDS has risen +8.1% in 5 days to 212.6 bps. US weekly retail sales have decelerated to a sluggish rate at +2.3%, which is the slowest since the week of April 5th of last year. US Rail/Trucking Traffic continues to soften. The Philly Fed ADS Real-Time Business Conditions Index continues to trend lower from its late-December peak. Moreover, the Citi US Economic Surprise Index has fallen back to late-Aug. levels. Lumber is -9.3% since its March 1st high despite improving sentiment towards homebuilders and the broad equity rally ytd. Moreover, the weekly MBA Home Purchase Applications Index has been around the same level since May 2010 despite expectations for a strong spring home selling season. The Baltic Dry Index has plunged around -55.0% from its Oct. 14th high and is now down around -45.0% ytd.China Iron Ore Spot has plunged -25.0% since Sept. 7th of last year.Shanghai Copper Inventories have risen +130.0% ytd. The CRB Commodities Index is now technically in a bear market, having declined -22.8% since May 2nd of last year. Overall, credit gauge improvement today is meaningful, but gauges still remain at stressed levels. As well, while Spanish yields are falling substantially, they are still in the danger zone. The euro currency, oil and copper are bouncing strongly today, but remain in intermediate-term downtrends. Lumber is not participating in the big commodity rally. The FIBERUS Scrap Steel Index is dropping -12.5% today, the biggest decline since 2008. As well, the 10Y continues to trade too well as the yield is rising just +7 bps today to 1.65%. I still believe the level of complacency among US investors regarding the rapidly deteriorating situation in Europe is fairly high. While Europe appears to have kicked-the-can again, I suspect investor euphoria will be fairly short-lived. The plans will do little to boost economic growth in the region. Massive tax hikes and spending cuts are still yet to hit in several key countries that are already in recession. Lack of competitiveness has not been addressed. It is unclear whether or not Germany has really agreed to anything that changes the situation substantially.The Citi Eurozone Economic Surprise Index is at -89.10 points, which is the lowest since early-Sept. of last year. Moreover, the “solutions” for the European debt crisis I still hear being bandied about are only bigger kick-the-cans that if implemented will eventually lead to an even bigger catastrophe as Germany is engulfed, in my opinion. The European debt crisis is also really beginning to bite emerging market economies now, which will further pressure exports from the region and further raise the odds of more sovereign/bank downgrades. Uncertainty surrounding the effects on business of Obamacare, the "US fiscal cliff " and election outcome uncertainty will likely become more and more of a focus for investors as the year progresses. Finally, the upcoming earnings season could prove more challenging than usual for big multi-nationals given US dollar strength and the precipitous declines in some key parts of the global economy during the quarter. I still believe there is too much uncertainty on the horizon to conclude a durable stock market low is in place. For this year's equity advance to regain traction, I would expect to see a resumption in European credit gauge improvement, a subsiding of hard-landing fears in key emerging markets, a rising 10-year yield, better volume, stable-to-lower energy prices, a US "fiscal cliff" solution and higher-quality stock market leadership. I expect US stocks to trade mixed-to-lower into the close from current levels on Obamacare/US fiscal cliff concerns, profit-taking, rising energy prices, earnings worries and more shorting.

EU Leaders Ease Debt-Crisis Rules for Spain as Merkel Retreats. Euro-area leaders agreed to ease repayment rules for emergency loans to Spanish banks and relax conditions on potential help for Italy as an outflanked German Chancellor Angela Merkel gave in on expanded steps to stem the debt crisis. After 12 hours of talks ending at 4:30 a.m. in Brussels today, leaders of the 17 euro countries dropped the requirement that governments get preferred creditor status on crisis loans to Spain’s blighted banks, European Union President Herman Van Rompuy said. Banks can also be recapitalized directly by bailout funds rather than going through governments, he said. Euro-area leaders also discussed ways to reduce the risk premiums on Italian and Spanish bonds, which have driven concern by economists, investors and Europe’s global partners including the U.S. that the currency union risks coming apart. “There is a whole array of possible interventions and measures,” Luxembourg Prime Minister Jean-Claude Juncker, who heads the group of euro-area finance ministers, told reporters. “It will be a task for the central bank, the eurogroup and the commission and others to pull out the right card at the given time.” With the turmoil in its third year and Europe’s political landscape shifting against Merkel, French President Francois Hollande led a rebellion against Germany’s prescriptions with calls for immediate relief for hard-hit countries. He put French backing of a German-inspired deficit-control treaty on hold, and Italy and Spain withheld approval of a 120 billion-euro ($149 billion) growth-boosting package unless Germany authorized steps to calm their bond markets.

Juncker Says Euro Leaders Keep All Options Open to Calm Markets. Luxembourg Prime Minister Jean- Claude Juncker, who heads the group of euro-area finance ministers, said euro leaders agreed on “short-term measures” to aid Spain and Italy. “We will keep all options open to make the interventions that need to be done to calm the situation,” Juncker told reporters in Brussels today after the first day of a European Union summit. “We will conclude this in definite tomorrow morning. We made significant progress.”

Ireland's Second Bailout Looms With No Bank Accord: Euro Credit. Ireland's borrowing costs may signal the government is being drawn into needing a second bailout as the country struggles to cope with the legacy of the euro region's worst banking crisis to date. Irish October 2020 bonds, regarded as the benchmark, yielded 7.13 percent yesterday, less than a percentage point shy of the level that pushed the state into an international rescue in 2010. "At this point, a second bailout for Ireland is the most plausible option," Chris Johns, who manages about $7 billion at State Street Global Advisors in Dublin, said in an interview. "One of the main reasons Ireland can't go back to markets is that investors have significant concerns about our solvency and that's down in part to banking debt."

Abound Solar to Suspend Operations, Will Seek Bankruptcy. Abound Solar Inc., a U.S. solar manufacturer that was awarded a $400 million U.S. loan guarantee, will suspend operations and file for bankruptcy because its panels were too expensive to compete. Abound borrowed about $70 million against the guarantee, the Loveland, Colorado-based company said today in a statement. It plans to file for bankruptcy protection in Wilmington, Delaware, next week. The failure will follow that of Solyndra LLC, which shut down in August after receiving a $535 million loan guarantee from the same U.S. Energy Department program.

Commodities Fall Broadly On Health Care Ruling. Most commodity prices fell Thursday after a U.S. Supreme Court ruling on health care and a European summit meeting heightened concerns about demand for basic materials. The downturn was widespread and mirrored a decline in stocks. Investors worried that the provisions could mean less disposable income for businesses and consumers when economic growth already is slower, said Phil Streible, a commodities broker at RJ O'Brien.

Demand for Auto-Loan Bonds May Hurt Credit Quality, Moody’s Says. Heightened competition in the subprime automobile-lending market may result in large investor losses if growing demand weakens underwriting standards, according to Moody’s Investors Service. The market has grown over the past two years as private equity firms, including Blackstone Group LP and Perella Weinberg Partners LP, are drawn to the sector’s profitability, Moody’s analysts including Peter McNally wrote today in a report. That recent influx of capital echoes trends that led to a lending bubble and heavy losses in the 1990s, signaling a similar downturn may be repeated if competition for attractive returns deteriorates the credit quality of portfolios.

FHA Underestimates Mortgage Delinquency Rates, Study Says. More than 40 percent of the U.S. Federal Housing Administration loans originated from 2007 through 2009 will be delinquent within five years and the agency’s data underestimate that risk, according to a study by the Federal Reserve Bank of New York and New York University. “Having such a very large fraction of the people who borrow from you become delinquent could never be regarded as good public policy,” said Andrew Caplin, a professor of economics at New York University and one of the study’s authors.

Leveraged Loan Sales Shrink 30% on Buyout Slump: Credit Markets. The amount of leveraged loans made in the U.S. is down almost 30% this year from the same period of 2011 as a slowing economy cuts borrowings for buyouts to a three-year low.

RIM(RIMM) Reports Loss as It Cuts Jobs, Delays BlackBerry 10. Research In Motion Ltd., losing ground to Apple Inc. (AAPL) and Google Inc. (GOOG), said it will delay the BlackBerry 10 phone release, cut 5,000 jobs and posted a quarterly loss that was five times bigger than projected. The stock plunged 22 percent after the company reported a first-quarter loss of 37 cents a share, excluding some items. Analysts had estimated a 7 cent loss, according to data compiled by Bloomberg. Sales tumbled 43 percent to $2.8 billion, missing an estimate of $3.05 billion.

Mortgage Seizure Plan Sparks AllianceBernstein Talks With County. Bondholders including Angelo Gordon & Co. and AllianceBernstein LP heard from a California county’s top executive amid mounting concern it will use eminent domain to seize mortgages packaged into securities to aid homeowners who owe more than the properties’ values. The Association of Mortgage Investors organized a conference call on June 27 with San Bernardino County Chief Executive Officer Greg Devereaux, said Chris Katopis, the Washington-based group’s executive director. Staff and members of other trade organizations were also invited to participate, he said, amid speculation the unprecedented strategy may serve as a template for other areas.

Eminent Domain Is Bad Ploy for Underwater Mortgages. Officials in San Bernardino County, California, believe they have figured out a clever way to solve the county’s, and possibly the nation’s, housing problems. Detailed by a Cornell University professor, and pitched by influential San Francisco investors who stand to make a fortune from it, this new idea is based on one of the oldest concepts: the taking of other people’s property. County officials, joined by the cities of Ontario and Fontana, are considering using an expansive interpretation of eminent domain -- typically used to acquire real property to build public works -- to seize the mortgages, not the real property, of those homeowners who owe more than their homes are worth. The funds would be provided by private investors, who would pay the holders of the mortgages “fair market value” and then write new ones for the homeowners based on much lower principal amounts, reflecting the new depressed values of the homes. The firm behind this complex plan, Mortgage Resolution Partners, may be in the running to acquire vast numbers of mortgages at discounted rates.

Banker to the Bankers Knows the Numbers Are Lying. The Bank for International Settlements, which acts as a bank for the world’s central banks, should know fudged numbers when it sees them. What may come as a surprise is how openly it has been discussing the problem of bogus balance sheets at large financial companies. “The financial sector needs to recognize losses and recapitalize,” the Basel, Switzerland-based institution said in its latest annual report, released this week. “As we have urged in previous reports, banks must adjust balance sheets to accurately reflect the value of assets.” The implication is that many banks are showing inaccurate numbers now.

Australian Puts Reach 14-Month High as Commodities Slump: Options. The bear market in commodities and slowing economic growth in China is driving the cost of protecting against losses in Australian stocks to the highest level in 14 months. Puts 10% below the S&P/ASX 200 Index cost 1.37 times more than calls 10% above, according to data on six-month options compiled by Bloomberg. The price relationship known as skew, a measure of bearishness, reached 1.52 on June 22, the highest since April 2011.

Japan’s Industrial Output Falls Most Since 2011 Quake. Japan’s industrial output fell the most since the March 2011 earthquake and tsunami as weakness in European demand limited automobile output. Production declined 3.1 percent in May from April, the Trade Ministry said in Tokyo today. That compared with the median estimate in a Bloomberg News survey for a 2.8 percent drop. The slide was 0.2 percent the previous month.

Chinese Industrial Companies’ Profits Drop for Second Month. Chinese industrial companies’ profits fell for a second month in May, a government report showed today, as slowing economic growth hurt corporate earnings. Income dropped 5.3 percent from a year earlier to 390.9 billion yuan ($61 billion), the National Bureau of Statistics said on its website today. That compares with a 2.2 percent decline in April and 4.5 percent gain in March. The deterioration adds to signs that government measures to stimulate the world’s second-biggest economy have yet to reverse a slowdown that may deepen for a sixth quarter.

Wall Street Journal:

Unwanted Label of 'Tax' Saves Health Measure. He never wanted people to think of it as a tax. Whenever President Barack Obama talked about his health-care overhaul, political realities forbade use of the T-word. But his signature domestic policy, which he signed into law in March 2010, survived because the high court ruled Thursday that the enforcement tool at its core is just that: a tax.

The Tax Duck. A sampling of Democratic denials—from President Obama on down—that the individual mandate is a tax, as the Supreme Court ruled it is.

Medicaid Decision Looms for States. The Supreme Court's decision to let states opt out of the health overhaul's Medicaid expansion without losing current funding for the program lifts a budget mandate from states but could mean fewer Americans gain insurance coverage under the law.

J.P. Morgan(JPM) Models Get Regulatory Spotlight. Regulators have stepped up scrutiny of J.P. Morgan Chase & Co.'s internal controls by asking the bank to demonstrate that its risk models are designed and working properly, according to people close to the situation. The Office of the Comptroller of the Currency, the bank's primary regulator, has requested reviews of models that measure the possible effects of everything from trading losses to interest-rate moves, the people said.

In a Shift, Chinese Exporters Cling to Dollars. Many Chinese exporters are starting to hoard the dollars they earn, betting that the yuan is unlikely to appreciate much more, a shift in strategy that is having a ripple effect throughout the country's financial system.

Turkey Sends Troops to Syria Border. Military Units Redeploying After Downing of Jet; Assad Defiant on Eve of International Meetings on Transition Plan. Turkey appeared to deploy armored military units on its border with Syria, raising tensions in the region after Ankara promised "decisive steps" in response to Syria's shooting down of a Turkish military jet last week.

U.S. Clears China From Iran Oil Sanctions. The U.S. exempted China from penalties for doing business with Tehran as the latest set of U.S. sanctions targeting Iran's oil exports took effect on Thursday. The State Department, which had determined that China had significantly reduced its purchases of Iranian crude, had previously exempted 19 other countries, all traditional purchasers of Iranian crude. That left China, the biggest buyer of Iranian oil, potentially shut out of doing business with the U.S.

It's Up to the Voters Now. The last chance to stop ObamaCare is in November. If there is a modicum of hope in Chief Justice John Roberts's inglorious one-man opinion Thursday, it is that Americans were reminded again that they cannot count on others to protect their liberty. Certainly judges aren't reliable. They can be turned by the pressure of the media and the whims of vanity. If Americans want to repeal ObamaCare, their only recourse is to demand it at the ballot box in November.

Fox News:

NY Fed: ECB Taps $11.5 Billion from Dollar Swap Facility in Latest Week. The European Central Bank borrowed dollars from the Federal Reserve during the week ended June 27, replacing more than the amount rolling off from prior loans, the New York Federal Reserve Bank reported Thursday. New dollar borrowings by the ECB totaled $11.542 billion for the week. This includes a seven-day tap of $1.6 billion at an interest rate of 0.66%, and $9.942 billion in an 84-day loan at a rate of 0.67%. Past borrowings of $8.697 billion matured. Total borrowings from the facility rose to $27.059 billion from $24.215 billion. A majority of these loans is held by the ECB.

Small Business on Obamacare: No Reason to Hire or Invest. Small business owners and advocates responded to today’s Supreme Court decision on the Patient Protection and Affordable Care Act with anger, confusion and a lot of questions about where they go from here. “At this point, I have more questions than I have answers,” said Larry Mocha, president, Air Power Systems in Tulsa, Okla. “We already provide health insurance for our employees and have for many years. How will this impact our premiums? How will this impact [America’s] health-care system? And how will this impact my small business?”

Ford Motor(F), Citing Europe’s Woes, Says Foreign Losses to Triple in Quarter. Europe’s economic woes are taking a much bigger bite out of the profits of Ford Motor, which until now has largely avoided the hefty losses that have dragged down the profits of many of its rivals. The company said on Thursday that its total international losses would triple in the second quarter, with Europe accounting for the most of the loss. Ford lost $190 million in the first quarter in its international operations, which include Europe, South America and the Asia-Pacific region. Europe was responsible for $149 million of the total. The company’s chief financial officer, Robert Shanks, said in an interview that conditions in Europe were “getting tougher,” as manufacturers stepped up discounts to jump-start sales, which are at their lowest level in more than a decade. “We lost $190 million in the first quarter, and it will be three times greater than that” in the second quarter, Mr. Shanks said in the interview, held at Ford’s world headquarters. A loss on international operations of $500 million to $600 million in the quarter, which will end on Saturday, would depress Ford’s overall earnings for the period. The company previously forecast that international losses in the second quarter would be roughly the same as in the first quarter.

Seeking Alpha:

Cross Currency Swaps And EUR/USD: The Missing Link. (graphs) The focus of the euro crisis is becoming more and more about the links between banks' capital requirements and sovereign debt, which explains why the correlation between core/non-core sovereign spreads and the cross currency basis is negative.

Washington Times:

Roberts to the rescue for Romney. Obamacare is unconstitutional if it were to be enacted via the Commerce Clause, but not if it’s simply a tax, the justice wrote. “Because the Constitution permits such a tax, it is not our role to forbid it, or to pass upon its wisdom or fairness.” In so doing, Justice Roberts has just busted Campaign 2012 wide open. The high court’s ruling leaves in place 21 tax increases costing nearly $700 billion. Of those taxes, 12 would affect families earning less than $250,000 per year. Now that Obamacare’s penalty is a “tax,” not a “fee,” Mr. Obama is breaking a 2008 campaign pledge not to raise taxes on Americans earning less than $250,000. This new “tax” will hit across the economic spectrum, despite his campaign declaration that health care should “never be purchased with tax increase on middle-class families.” Now, Mr. Obama and congressional Democrats have enacted the largest tax increase in history.

Wall Street still ignoring the fiscal cliff. Most economists aren't factoring the doomsday scenario into their forecasts.Here we go again. Wall Street has a history of not focusing on bad news until it's too late. Then panic ensues. We might be seeing that pattern again with the so-called fiscal cliff. A recent survey found that 93% of top Wall Street strategists and economists still aren't factoring into their estimates for next year the epic mix of tax increases and spending cuts that are expected to kick in January 1. The question is whether Wall Street is correctly handicapping the fiscal cliff, or just being ignorant.

Reuters:

Goldman(GS) trims U.S. staff: sources. Goldman Sachs Group Inc trimmed staff in its U.S. operations on Thursday, amid a slowdown in capital markets activity, three people familiar with the matter said.

Nike(NKE) profit hit by costs, shares fall.Nike Inc missed quarterly profit estimates for the first time in at least two years as higher spending and increased costs of materials used in its shoes and T-shirts hurt margins, while demand eased in international markets. The results sent shares of the world's largest sportswear maker down nearly 13 percent in extended trading on Thursday. Orders of Nike branded shoes and clothes scheduled for delivery from June through November, a closely-watched metric of demand known as "futures orders" rose 7 percent. That is less than half of the rise of futures orders in the fiscal third quarter. In the fourth quarter that ended May 31, futures orders rose only 5 percent in Greater China, down from a 24 percent increase a year earlier, a sign that even the popular Nike "swoosh" is not immune to slowing global economic growth.

NYC public hospitals see big financial hit from healthcare law. The New York City Health and Hospital Corporation expects to lose $2.3 billion over eight years from the Medicaid cuts included in President Barack Obama's new healthcare law. The U.S. Supreme Court on Thursday upheld Obama's signature healthcare overhaul requiring that most Americans get insurance by 2014 or pay a financial penalty. Alan Aviles, the HHC chief executive officer, said on Thursday that although more people will have insurance, this will not make up for the loss of Medicaid funds. HHC is the nation's biggest public hospital system and it serves 1.3 million New Yorkers every year. Aviles did not yet know how much the city's public hospitals would save by treating more insured patients. But "It is highly unlikely that it will come remotely close to $2.3 billion," he said.

United Technologies(UTX) sent military copter tech to China. United Technologies Corp o n T hursday admitted selling China software that helped Beijing develop its first modern military attack helicopter, one of hundreds of export control violations over nearly two decades. At a federal court hearing in Bridgeport, Connecticut, United Technologies and its two subsidiaries, Pratt & Whitney Canada and Hamilton Sundstrand Corp, agreed to pay more than $75 million to the U.S. government to settle criminal and administrative charges related to the violations. As part of the settlement, Pratt & Whitney Canada pleaded guilty to two federal criminal charges - violating a U.S. export control law and making false statements.

Telegraph:

RBS and Lloyds drawn into rate-rigging scandal. Royal Bank of Scotland and Lloyds have been accused of systematically rigging financial markets in a growing international scandal which wiped billions off the value of shares in Britain’s biggest banks.

Banks Face Ban From Selling Interest Rate Swaps. Banks will be banned from selling interest rate swaps to small businesses as part of a settlement package to be announced by the Financial Services Authority (FSA), which could see lenders make large compensation payments to firms mis-sold complex derivatives.

BOTTOM LINE: Asian indices are higher, boosted by financial and commodity shares in the region. I expect US stocks to open higher and to weaken into the afternoon, finishing modestly higher. The Portfolio is 50% net long heading into the day.

EU Chiefs Put Bond Buying on Table as Crisis Summit Opens. European Union leaders focused on immediate help for Spain and Italy at the start of a two-day summit intended to chart a path out of their financial crisis. The 27 government chiefs will discuss buying Spanish and Italian government bonds to bring down borrowing costs that are near euro-era records, Finnish Prime Minister Jyrki Katainen said. He also proposed that bailout funds buy collateralized government debt in primary markets. “I’ve come for very rapid solutions to support countries in difficulty on the markets,” French President Francois Hollande told reporters as he arrived in Brussels. Without specifying Spain or Italy, he said they “have made considerable efforts to deal with their public accounts.” Leaders will consider short-term measures to stem the sovereign debt turmoil as EU President Herman Van Rompuy’s road map to strengthen the bloc’s common currency and financial oversight ran into immediate opposition from Germany.

Euro-Area Confidence Slumps, German Unemployment Rises. Economic confidence in the euro area slumped to the lowest in more than 2 1/2 years in June and German unemployment increased more than economists forecast, adding to signs the European economy fell into a recession. An index of executive and consumer sentiment in the 17- nation euro area dropped to 89.9 from a revised 90.5 in May, the European Commission in Brussels said today. That’s the lowest since October 2009. In Germany, the number of people out of work rose a seasonally adjusted 7,000 to 2.88 million, a separate report showed. Economists in a Bloomberg News survey had forecast a gain of 3,000 in the month. Rising unemployment in Europe’s largest economy underscores indications of a deepening economic slump as the sovereign-debt crisis shifts from periphery states to core members. “Germany won’t be able to disconnect from the euro-region developments,” said Christoph Weil, an economist at Commerzbank AG in Frankfurt. “The second quarter will show an economic contraction and there are no signs of improvement for the following three months. Whether the situation stabilizes afterward hinges decisively on the euro crisis and latest developments are no real reason for optimism.”

UK Disposable Income Plunges As Economy Contracts .3%. Britons’ disposable income fell for a second quarter in the first three months of the year, when consumer spending unexpectedly declined and the economy shrank. Real disposable income dropped 0.9 percent from the previous three months, when it also fell by that amount, the Office for National Statistics said today in London. Consumer spending was revised to a 0.1 percent decline from a 0.1 percent increase, while gross domestic product fell 0.3 percent. The decline in consumer spending in the first quarter followed a 0.5 percent increase in the October-December period and declines in the preceding three quarters. Real disposable income is now at its lowest in three years. The savings ratio declined to 6.4 percent from 6.9 percent, the lowest in a year.

Derivatives Show Money-Market Stress Rises as Euro Summit Opens. Forward markets signaled increased stress in the money markets as European leaders began a two-day summit on the region’s debt crisis. Predictions in the forward market for the gap between the London interbank offered rate and federal funds, known as Libor- OIS, rose to 33.2 basis points from 31.3 basis points yesterday, according to the second rolling three month so-called FRA/OIS spread. The difference between the two-year swap rate and the comparable-maturity Treasury note yield, known as the swap spread, widened 1.5 basis points to 25 basis points.

European Stocks Fall as EU Leaders Hold Summit. The Stoxx Europe 600 Index slid 0.5 percent to 244.67 at the close in London, after earlier dropping as much as 1.3 percent. The benchmark measure has fallen 10 percent from its high in March, paring its gain for the year to 0.1 percent, as the euro area’s sovereign-debt crisis threatened a slowdown in global growth. The volume of shares traded on the gauge was 9.1 percent higher than the average of the last 30 days, according to data compiled by Bloomberg.

Roach Says Euro Ponzi Scheme Won't Get Fixed by Van Rompuy. Stephen Roach, a professor at Yale University, said the euro-area debt crisis is a result of the currency bloc effectively being a Ponzi scheme, and European Union President Herman Van Rompuy’s plan to solve the turmoil “is not worth the paper it’s printed on.” “It is the vaguest report for a region in crisis I have ever seen in my entire life,” Roach, former non-executive chairman for Morgan Stanley in Asia, said in an interview with Tom Keene and Sara Eisen on Bloomberg Television’s “Bloomberg Surveillance” in New York today. “He talks about a vision. The guy has got sunglasses on. He can’t see the light of day.”

China Local Government Finances Are Unsustainable, Auditor Says. The finances of China’s county-level governments are unstable and unsustainable as the majority of their fiscal income comes from sources other than taxation, the nation’s top auditor said. About 60 percent of revenue raised last year by 54 counties investigated by the National Audit Office wasn’t derived from taxes, Liu Jiayi, the head of the agency, told a meeting of the legislature yesterday, according to a transcript of his speech on the audit office’s website. Total fiscal revenue at those counties rose 17 percent to 112 billion yuan ($17.6 billion) last year, Liu said.

China's Stock Index Erases 2012 Gain After June Plunge. China’s Shanghai Composite Index (SHCOMP), the world’s second worst-performing stocks measure this month, erased this year’s gain on concern a manufacturing slump and the European debt crisis will deepen the economic slowdown. The Shanghai index dropped 1 percent to 2,195.84 at the close, a seventh day of losses. The gauge has lost 7.4 percent in June. The measure had gained as much as 12 percent this year through its peak on March 2. Trading values on the Shanghai Stock Exchange fell to a five-month low yesterday. “The economy is still slowing and earnings growth forecasts have further room to be revised downward,” said Wu Kan, a Shanghai-based fund manager at Dazhong Insurance Co., which oversees $285 million. “Weak sentiment will dominate as investors have no idea how slow earnings growth will be.”

China Stocks to Extend Drop After Losing 2012 Gains, BoCo. China’s stocks are poised to extend losses after erasing this year’s gains amid concerns over a slowing economy, according to the only strategist who forecast declines for Chinese shares in 2012. The economy probably expanded at a “subpar” rate in the second quarter and investors should buy shares of companies such as consumer-staples producers, whose earnings may be sheltered from the slowdown, Hao Hong, head of Chinese research at Bank of Communications Co. in Hong Kong, said by e-mail yesterday, declining to name stocks. The Shanghai Composite Index may fall “briefly” below 2,000 in a worse-case scenario, he said.

Jobless Claims in U.S. Hovered Last Week Near 2012 High. The number of applications for unemployment benefits hovered last week near the highest level of the year, showing little improvement in the U.S. labor market. Jobless claims decreased by 6,000 to 386,000 in the week ended June 23, in line with the median forecast of economists surveyed by Bloomberg News, Labor Department figures showed today in Washington. The prior week’s reading was revised up to 392,000 from 387,000, matching an April figure as the steepest of 2012. Concern about the fallout from the European debt crisis and the so-called fiscal cliff that will face the U.S. at the end of this year may prompt employers to keep payrolls lean. “There is no progress,” said Jeremy Lawson, a senior U.S. economist at BNP Paribas in New York. “There is clearly an underlying weakness that is troubling. The labor market is sputtering along, struggling to create jobs. The pace of consumer spending will slow in the second quarter.”

Supreme Court Upholds Obamacare as Tax. In a surprise conclusion to a constitutional showdown, Chief Justice John Roberts joined the Supreme Court's four liberals Thursday to uphold the linchpin of President Barack Obama's health plan, the individual mandate requiring citizens to carry insurance or pay a penalty. By a 5-4 vote, the court held the mandate valid under Congress' constitutional authority "to lay and collect Taxes" to provide for "the general Welfare of the United States." The penalty for failing to carry insurance possesses "the essential feature of any tax," producing revenue for the government, Chief Justice Roberts wrote. Although the Obama administration always asserted the penalty was valid under the federal taxing power, until Thursday no court had fully accepted that theory. Those that upheld the Patient Protection and Affordable Care Act, as the law is known, did so under Congress's constitutional power to regulate interstate commerce.

U.S. Subprime Auto-Loan Rates of Near 20% Underpin Bond-Issue Boom. Nearly anyone can get a car loan these days, as long as they are willing to stomach dizzyingly high interest rates--and yield-hungry investors continue to embrace riskier credits. The alignment of those factors is spawning bigger and more frequent subprime auto asset-backed securities issues this year, including this week's $1.4 billion deal from Santander Consumer USA, the largest of its kind since 2007. In all, Santander, General Motors Co.'s (GM) GM Financial and smaller lenders have issued $10 billion of subprime auto-related ABS year-to-date, which is 20% ahead of last year's pace and adding to the overall rise in securities backed by auto loans and leases, rental cars and dealer floor plans, according to Barclays. The jump in issuance is being driven by a boom in lending to car buyers with dented credit, a stark contrast to the paucity of subprime loans for housing.

Italian Yields Rise at Auction Ahead of EU Summit. Italy's benchmark 10-year borrowing costs hit a six-month high of 6.19 percent at auction on Thursday ahead of a European Union summit where measures to ease market pressures advocated by Rome are expected to meet firm German opposition.

Actually, Justice Roberts Demolished Obama In His Supreme Court Ruling. Instead, Roberts argued that the individual mandate is constitutional because it enacts a tax, not a fee. Obama's Solicitor General Donald Verrilli made the exact opposite claim in his oral arguments to the Supreme Court last March. It seems like a very real possibility, then, that when the glow of today's victory wears off, Obama may find that Roberts' ruling was actually a Trojan Horse. Democrats have adamantly argued that the individual mandate is not a tax, but that claim will hold a lot less water after today's decision. Meanwhile, Republicans, despite their newfound dislike of Robert immediately seized on the "Obamacare raises taxes" attack line, and are already raising the specter of the IRS to fire up the conservative base.

Retailers Are 'Dismayed' By Supreme Court Ruling. Retailers are "dismayed" by the Supreme Court's decision to uphold most of Obama's healthcare plan, according to the National Retail Federation. The law unfairly penalizes employers and the private sector, NRF President Matthew Shay said in a release today.

Abound Solar to Soon Close Its Doors. Another DOE loan recipient giving up the ghost. Many solar jobs will be lost, and many fingers will be pointed. The VC-funded DOE loan-recipient was working with the cadmium telluride (CdTe) thin-film materials system and had hoped to achieve the success of its CdTe competitor First Solar. The firm was the beneficiary of a $400 million DOE loan guarantee, only $70 million of which has been drawn down. So, despite the imminent comparisons to Solyndra, this is bad news -- but not quite on the scandalous scale of that solar module maker.

Barlcays(BCS) Plunges 15.6%, Leads European Shares Lower. European shares ended lower on Thursday, led by banks, with investors primed for disappointment from the latest European Union summit to tackle the debt crisis, but not expecting a further steep market selloff. A 2.5 percent decline in banking shares, led by a 15.6 percent slump in Barclays following investigations that found it tried to manipulate key market interest rates, also weighed on the choppy market that witnessed sharp swings on contrasting comments from European policymakers and leaders.

John Paulson's Returns Falter Again; Investors Fret. Billionaire trader John Paulson has told his wealthy investors that he has learned from his mistakes of 2011, which produced enormous losses for his closely watched hedge fund. The founder and manager of Paulson & Co, who made his fortune and fame by betting against the subprime mortgage market, went so far as to tell investors in January that last year's big losses, including a 50 percent decline in his popular Advantage Plus fund, were an "aberration." But as the months tick on, many investors are still waiting to see the dramatic turnaround Paulson has vowed to deliver. Halfway through 2012, Advantage Plus is down again, losing 10 percent through May. Another big portfolio that bets on gold - once a bright spot for Paulson - was also in the red. In both cases, he blamed losses in gold stocks for the declines. This has taken a huge bite out of the firm's assets, which have fallen to $22 billion from $38 billion early last year, according to investors. Redemptions were substantial, but poor performance accounted for the bulk of the drop, they said.

China starts "combat ready" patrols in disputed seas. China has begun combat-ready patrols in the waters around a disputed group of islands in the South China Sea, the Defence Ministry said on Thursday, the latest escalation in tension over the potentially resource-rich area. Asked about what China would do in response to Vietnamese air patrols over the Spratly Islands, the ministry's spokesman, Geng Yansheng, said China would "resolutely oppose any militarily provocative behavior". "In order to protect national sovereignty and our security and development interests, the Chinese military has already set up a normal, combat-ready patrol system in seas under our control," he said. "The Chinese military's resolve and will to defend territorial sovereignty and protect our maritime rights and interests is firm and unshakeable," Geng added, according to a transcript on the ministry's website (www.mod.gov.cn) of comments at a briefing.

Some small business owners see '12 as year to sell. Jim Angleton did not plan on selling his small financial services business this year, but when a foreign buyer approached with the right offer he went ahead without regrets. "There's uncertainty moving forward," said Angleton, 56, who sold a unit of his Miami-based company, AEGIS FinServ Corp, which issues debit and credit cards to U.S. government employees working abroad. "Tax rules are constantly changing and they don't make sense. This time next year I'll probably be thankful I did this."

France and Germany clash at euro summit. François Hollande and Angela Merkel have clashed over calls from Italy and Spain for urgent European Union action to relieve their borrowing costs, after their pleas were dismissed as "scaremongering" by allies of the German chancellor.

EU Plans Curbs on Hedge Fund Pay. European regulators published draft rules today to crack down on excessive bonuses for managers of hedge funds, a sector politicians have blamed for worsening euro zone debt problems. Policymakers have already clamped down on bankers' bonuses, a move that has proved popular in the wider world where most people's incomes are becoming ever-more squeezed. The prospect of big bonuses can also encourage employees at financial firms to take excessive risks, regulators say. The European Securities and Markets Authority (ESMA) said on Thursday such curbs must be extended to managers of alternative investment funds, including hedge funds and private equity and real estate funds. The rules could have a huge effect on hedge fund managers - the bulk of whose pay is from performance fees - and will apply from the end of this year to senior managers, risk takers and employees whose total package puts them in the same bracket as top management.

Republica:

Germany's Resources Not Unlimited. Foreign Minister Guido Westerwelle says Germany is against "euro bonds as putting debts together doesn't help growth," he said.

Sina:

Eurozone Crisis' Ripple Effect Felt In China. A solution to the eurozone's fiscal woes is not expected in the near future, despite a two-day meeting by the leaders of EU members states on Thursday to discuss a solution to the crisis. The crisis has triggered an economic recession and even stoked fears of a dissolution of the eurozone. Its ripple effect, however, has reached all the way to China, a major trading partner of the EU. Chinese exporters are among the direct victims of a crisis that has led to high unemployment, a reduction in consumer spending and a corresponding depletion of demand for Chinese-made goods. Small clothing companies in south China's Guangdong province are feeling the pinch. Their profits have already been squeezed by the Chinese currency's sharp appreciation against the euro, as well as increases in the cost of labor and raw materials. The Chinese yuan has appreciated by 23 percent against the euro since 2010, making Chinese goods less competitive in the eurozone. "Despite higher costs on our side, European traders still ask for lower prices. We are left with lower profits," said Shen Yonglin, chairman of Guangzhou Shenshi Clothing Co.

Wednesday, June 27, 2012

European Bank Union ‘Premature’ Amid Resistance to Debt Sharing. A European banking union is no fix for the region’s lenders, trading at a fraction of the book value of their assets, without closer fiscal integration and a solution to the sovereign debt crisis, investors say. Policy makers will discuss ways to coordinate bank oversight, bring together national deposit guarantees and combine crisis management powers at a summit in Brussels today and tomorrow in an effort to bolster confidence in the region’s lenders. For a banking union to succeed, investors say, Europe must achieve for lenders what it’s failed to accomplish for governments: shared liabilities. “Talk about a banking union is too premature,” said Guy de Blonay, a London-based fund manager at Jupiter Fund Management Plc, which oversees about $37.5 billion. “Europe hasn’t taken steps to restoring an orderly sovereign debt market. You need economies to borrow at a decent rate.”Lenders in Europe, burdened by $1.2 trillion of holdings in Spanish, Portuguese, Italian and Irish government bonds, face rising bad loans as the single-currency region teeters on the brink of recession. Governments’ struggles to repay their debt as economies contract is adding to skepticism they can support ailing lenders. Germany’s opposition to sharing government and bank liabilities is raising concern a banking union will become another blunt tool in efforts to tame the crisis.

Summit Stalemate Endangers Top Sovereign Ratings: Euro Credit. As European leaders debate how to save the 17-nation euro area at their summit today, investors are pricing in savage credit downgrades with four countries losing their Aaa status. Austria, Finland, France and the Netherlands may be cut by as many as nine levels from their top grades, according to a Moody's Analytics review of credit-default swaps prices. Demand for haven securities drove two-year note yields on Germany to a record low of minus .012 percent this month. Bondholders are accumulating debt insurance on concern sovereign borrowing costs will rise as ratings are undermined by the surging bill for bailing out weaker euro-area nations, recessions curb tax revenue and welfare payments increase. With Spain and Cyprus seeking aid this week, markets are skeptical the summit will find a pathway out of the crisis. "Investors are gradually discovering that a large proportion of stuff they thought was safe is turning out not to be," said Matt King, global head of credit strategy at Citigroup Inc. in London. "We are concerned that even as the magnitude of the risks is becoming bigger, policy makers seem as far apart as ever when it comes to agreeing on solutions."

Germany’s Steinbrueck Tells Passauer Shared Debt Needs Oversight. European debt sharing isn’t possible without countries accepting external budget oversight, Peer Steinbrueck, Germany’s former Finance Minister, told Passauer Neue Presse. “First I want to see that Germany and the Mediterranean countries say, ‘Great, the rule will be: if we can’t keep our own budgets in order, our budget rights will move to a European institution,’” the newspaper cited Steinbrueck as saying in an e-mailed preview of an interview to be published today. “Otherwise it’s not acceptable for Germany to accept liability for others. That would be like giving out a credit card: others do the shopping, and Germany pays.” Steinbrueck ruled out a banking union with common deposit insurance as suggested by European Union President Herman Van Rompuy, the newspaper said. Strengthening national deposit insurance together with broader European oversight and a European bank liquidation law would be possible, the newspaper cited the Social Democrat lawmaker as saying.

Will Angela Merkel Save Europe’s Banks? Europe’s leaders have raised hopes that, when they meet Thursday and Friday in Brussels, they will agree on a banking union aimed at severing the link between the health of the euro area’s financial institutions and the solvency of its governments. The plan’s success or failure, as with so much else in the currency union today, will depend on one person: German Chancellor Angela Merkel. Ultimately, the question of joint liability is a political one that goes far beyond banking. No currency union consisting of economies and cultures as different as, say, Germany and Spain can work unless its members agree to share the risks of financial and economic shocks. Refusing to do so is tantamount to rejecting the euro. So what will it be, Frau Merkel?

China’s Housing Curbs Will Remain ‘Tight,’ Shui On’s Lee Says. The Chinese government’s curbs on the housing market will remain “tight” this year, preventing transactions and prices from rebounding significantly, according to Shui On Land Ltd. (272), the developer controlled by Hong Kong billionaire Vincent Lo. “The volume of transactions has increased and sentiment is improving, but any substantial turnaround is unlikely,” said Freddy Lee, chief executive officer of Shanghai-based Shui On, in an interview in Singapore yesterday. “I feel that prices will maintain where they are for a while.”

China Local Government Finances Are Unsustainable, Auditor Says. The finances of China's county-level governments are unstable and unsustainable as the majority of their fiscal income comes from sources other than taxation, the nation's top auditor said. About 60% of revenue raised last year by 54 counties investigated by the National Audit Office wasn't derived from taxes, Liu Jiayi, the head of the agency, told a meeting of the legislature yesterday, according to a transcript of his speech on the audit office's website. Local governments have been forced to turn to non-tax income such as land sales and to increase debt because of the imbalance in tax revenue and spending obligations with the central government, Jia Kang, director of the finance ministry's Institute of Fiscal Science, was cited by the paper as saying.

China’s Stocks Decline for Seventh Day on Earnings Concerns. China’s stocks fell, dragging down the benchmark index for a seventh day, on concern the nation’s economic slowdown is curbing earnings growth. Gansu Qilianshan Cement Group Co. declined 2 percent after it said first-half profit may have dropped more than 50 percent from a year earlier. Inner Mongolia Baotou Steel Rare Earth Hi- Tech led a gauge of material producers to the steepest loss among industry groups after the U.S., Europe and Japan asked the World Trade Organization to resolve disputes over China’s limits on exports of rare-earths materials. “The economy is still slowing and earnings growth forecasts have further room to be revised downward,” said Wu Kan, a Shanghai-based fund manager at Dazhong Insurance Co., which oversees $285 million. “Weak sentiment will dominate as investors have no idea how slow earnings growth will be.”

Dealmaking Rebound Falters as Crisis Threatens Confidence. Dealmaking failed to make a comeback in the second quarter as the European debt crisis and volatile stock markets forced companies to delay big acquisitions. Takeovers fell about 2 percent from the first three months of the year to about $450 billion, the lowest level since 2009, according to data compiled by Bloomberg. Eaton Corp. (ETN)’s proposed purchase of Cooper Industries Plc (CBE) and Pfizer Inc. (PFE)’s sale of its infant-nutrition unit were the only deals to top $10 billion.

Mortgage Seizures Create ‘Very Serious Concerns,’ Sifma Says. Wall Street’s largest lobbying group is objecting to the use of eminent domain by municipalities to seize mortgages packaged into bonds so the loans can be shrunk to aid homeowners who owe more than their properties’ values. Both the investment firm and bank members of the Securities Industry and Financial Markets Association have “very serious concerns” based on an agreement approved last week by San Bernardino officials granting the authority to study and create such a program, said Ken Bentsen, executive vice president for public policy and advocacy at the New York-based trade group. By using eminent-domain powers, municipalities can force the sale of private property at prices deemed to be fair if doing so serves a public purpose.

Barclays(BCS) May Implicate Other Banks, Pitt Says. (video) Former U.S. Securities and Exchange Commission Chairman Harvey Pitt talks about record fines imposed by U.S. and U.K. regulators against Barclays Plc after the bank admitted it submitted false London and euro interbank offered rates.

Wall Street Journal:

European Banks Are Facing More Pain In Spain. Spanish-owned banks aren't the only ones under pressure to fortify themselves against Spain's crumbling economy. Foreign banks with big Spanish operations also find themselves in a tough position—and with few options. Three European banks—Barclays PLC, Deutsche Bank AG and ING Bank NV—have large Spanish units. They already have pumped in billions of euros of capital to shore up those businesses, but as the Spanish government conducts a wide-ranging review of the sector's health and the economy continues to struggle, they could demand even more, according to bankers and analysts.

Optimism on Europe Doesn't Add Up. In Europe there is hope, and then there is math. And the two are on a collision course. Optimists are counting on the latest make-or-break European summit that starts Thursday to deliver convincing steps toward the fiscal and banking unions deemed necessary to keep the euro alive. Unfortunately, even best-case scenarios for the two-day summit won't change some bleak arithmetic. This suggests the debt crisis will rage in Spain and Italy for years.

IRS Probes Political Group Tied to Rove. The Internal Revenue Service is taking initial steps to examine whether Crossroads GPS, a pro-Republican group affiliated with Karl Rove, and similar political entities are violating their tax-exempt status by spending too much on partisan activities.

Regulators Ramp Up Queries Into CDS Trades at Data Warehouse. Regulators are increasing the number of queries they make into global credit-default swaps trades reported to the Depository Trust & Clearing Corp., according to figures the data warehouse provider released Wednesday. DTCC said regulators submitted 360 searches in May, the most recent month for which data is available, compared with 37 searches in the same month last year. In April, the number of searches rose to 579 from 77 a year earlier.

News Corp.(NWSA) Board Approves Split in Principle. News Corp.'s board unanimously approved a plan to split the media conglomerate in two pieces, separating its lucrative entertainment operations from its publishing business, said a person familiar with the situation.

Madoff's Brother to Plead Guilty to Criminal Charges. Bernard Madoff's younger brother, Peter, is expected to plead guilty to criminal charges and has agreed to go to prison for 10 years, in the first admission of wrongdoing by a family member in a multibillion-dollar investment business that turned out to be "just one big lie."

Dow Jones:

SEC to Miss Deadline on Hedge Fund Ad Rules. The Securities and Exchange Commission will miss next week's deadline to adopt rules allowing hedge funds to engage in mass marketing but will likely move on the matter soon, SEC Chairman Mary Schapiro will say in prepared testimony for a hearing Thursday.

Attack Raises Fears of a New Gang War in Macau. A senior figure in Macau’s gambling industry was severely beaten by six men in a restaurant at his own casino, the highest-profile case of violence in the city’s booming gambling business since Portugal handed control of the former colony back to China in 1999.

LA Times:

Tiny Telescopes Implanted Into Eyes Help Elderly Patient See Better. UC Irvine ophthalmologists implanted tiny telescopes in two patients suffering from age-related, end-stage macular degeneration, the university announced this week. Doctors from the university's Gavin Herbert Eye Institute in December inserted one of the 4-millimeter telescopes into an 85-year-old Irvine resident's eye and another in a 94-year-old Anaheim resident's eye, according to a UCI statement. The devices restore limited vision by projecting an image onto the undamaged section of the retina, enabling patients to recognize faces, read and perform daily activities. After the implant, the Irvine resident was able to see her son's face for the first time in more than a decade.

Facebook's(FB) Advertising Growth Slowed Down A Lot In The Last Year. Facebook's U.S. advertising growth has slowed down to a third of what it was in 2011, according to a report issued Wednesday. After growing at impressive rates in the 60% range during the first three quarters of 2011, Facebook's advertising growth fell by more than half to 30% in the fourth quarter, and during the first part of 2012, the growth rate went down to 21.2%, according to a report by the IDC. The slowing growth has resulted in Facebook losing market share. After holding on to almost 14% of display advertising at the end of 2011, Facebook's share is now down to 12%.

Glencore fights to save $26 billion Xstrata bid. Commodities trader Glencore fought to save its $26 billion bid for miner Xstrata on Wednesday after shareholder Qatar stunned the pair with a late demand for better terms, forcing them to push back the timing of the deal.

Fed officials differ on whether more easing needed. Top Federal Reserve officials differed on whether the U.S. central bank needs to be more aggressive in spurring economic growth, indicating another round of easing is far from certain. Chicago Federal Reserve Bank President Charles Evans, one of the U.S. central bank's strongest advocates for further monetary policy easing, said Wednesday he is flummoxed by the Fed's timidity in the face of high unemployment and low inflation. However, his colleague, Atlanta Fed leader Dennis Lockhart, said the Fed would only need to act further if the economy took a turn for the worse or if Europe's simmering debt crisis boils over.

Italy debt cost likely to rise after Merkel rebuff. Investors are likely to drive Italy's borrowing costs further above 6 percent at a bond auction on Thursday after German Chancellor Angela Merkel brushed aside Spanish and Italian pleas for emergency action to steady debt markets. Battling with rising interest payments on its 1.95 trillion euro ($2.4 trillion) debt, Italy is offering up to 5.5 billion euros in five- and 10-year bonds just hours before the start of an EU summit where Prime Minister Mario Monti will keep pushing for joint moves to contain government funding costs.

Ansari Arrest Confirms Pakistan Role: PC. INDIA today claimed that the interrogation of Zabiuddin Ansari alias Abu Jundal — a key suspect in the Mumbai terrorist attack who has been arrested recently — had confirmed its suspicion that “state actors” in Pakistan had a role to play in the November 2008 attacks that left close to 200 people dead.

BOTTOM LINE: Asian indices are mostly higher, boosted by financial and automaker shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the day.

The positions and strategies discussed on BETWEEN THE HEDGES are offered for entertainment purposes only and are in no way intended to serve as personal investing advice. Readers should not make any investment decision without first conducting their own thorough due diligence. Readers should assume the editor of this blog holds a position in any securities discussed, recommended or panned. While the information provided is obtained from sources believed to be reliable, its accuracy or completeness cannot be guaranteed, nor can this publication be, in anyway, considered liable for the investment performance of any securities or strategies discussed.